Weak versus Strong Sustainability

Weak versus Strong Sustainability

Exploring the Limits of Two Opposing Paradigms, Third Edition

Eric Neumayer

This insightful book explores the limits of the two opposing paradigms of sustainability in an accessible way. It examines the availability of natural resources for the production of consumption goods and services, and the environmental consequences of economic growth. The critical forms of natural capital in need of preservation given risk, uncertainty and ignorance about the future are also examined. The author provides a critical discussion of measures of sustainability. As indicators of weak sustainability, he analyses Genuine Savings and the Index of Sustainable Economic Welfare, also known as the Genuine Progress Indicator. Indicators of strong sustainability covered include ecological footprints, material flows, sustainability gaps and other measures, which combine the setting of environmental standards with monetary valuation.

Appendix 2: The Hotelling Rule and Ramsey Rule in a Simple General Equilibrium Model

Eric Neumayer

Subjects: environment, ecological economics, environmental geography, geography, human geography


In a general equilibrium dynamic optimisation context, it no longer makes sense to ask how a representative resource-extracting and resource-harvesting firm would maximise its profits, as in Section 3.2.2, p. 53, since this is only the partial equilibrium approach. Instead, here the question is how a 'social planner' would maximise social utility over infmite time. 1 Let utility be derived from consumption only and let production be dependent on man-made capital and renewable and non-renewable resources only. There is no disembodied technical progress, that is no technical pr~ress that is not embodied in man-made capital. Labour input is assumed to be constant and is therefore suppressed in the production function. This is the simplest setting possible to derive the two rules. The problem of the social planner is as follows 00 MaxJ U(C)ยท e-ptdt o s.t. S =-R Z = a(Z)-E K = F(K,R,E)-C- f(R)-h(E) where U is utility, C is consumption, p is society's pure rate of time preference, t is a time index, S is the stock of non-renewable resources, R is resource depletion, Z is the stock of renewable resources, a(.) is the natural growth function of the renewable resource, E is .resource harvesting, K is the stock of man-made capital, F(.) is the production function,.f{.) is the expenditure function for non-renewable resource extr~ction, h(.) is the expenditure function for renewable resource harvesting. K is investment in man-made capital net of depreciation. It is common to...

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